Resumen
The monopolist?s incentives towards product proliferation are evaluated in an optimal controlmodel considering three alternative regimes: profit-seeking; social planning; and ahybrid case with monopoly pricing and a regulator setting product innovation to maximisewelfare. In equilibrium, the profit-seeking firm supplies a socially suboptimal number ofvarieties to reduce cannibalisation while the social planner exploits the same effect to satisfyconsumers? love for variety and decrease the market price of all products. In terms ofthe Schumpeter vs Arrow debate on the relationship between market structure and innovationincentives, the results obtained in this model have a definite Arrovian flavour